Preferreds mixed ahead of Yellen speech, finish higher; PennyMac lackluster post-pricing

By Stephanie N. Rotondo

Seattle, March 3 – The preferred stock market was mixed going into Friday trading but ended with a firmer tone following comments made by Janet Yellen, Federal Reserve chairman.

The Wells Fargo Hybrid and Preferred Securities index closed up 4 basis points. The index was down 7 bps at mid-morning. The U.S. iShares Preferred Stock index traded up 10 bps.

In a speech given in Chicago, Yellen said that benchmark interest rates will likely go up this month, barring any economic surprises.

Furthermore, she indicated that as many as three rate increases could come this year.

Over the course of the week, several Fed officials have indicated that the time is right to make a move, leading market watchers to give a March increase a 75% probability.

Late Thursday, PennyMac Mortgage Investment Trust priced $115 million of 8.125% series A fixed-to-floating rate cumulative redeemable preferreds.

The deal came in line with the 8.125% price talk and was upsized from $75 million.

The new issue was not faring all that well in Friday dealings, however.

A trader pegged the paper at $24.50 bid, $24.55 offered, adding that it had not yet freed to trade as of mid-morning.

“They grew it a little bit and then handed it out to weak hands,” he said. “Now it is just kind of flipping around out there.”

Toward the end of business, another source said that the deal had yet to free.

Morgan Stanley & Co. LLC, Keefe Bruyette & Woods Inc. and RBC Capital Markets ran the books.

The dividend will be fixed through March 15, 2024, at which point it will begin floating at Libor plus 583.1 bps.

As for other deals from the week, Apollo Global Management LLC’s $250 million of 6.375% series A preferred stock – a deal priced Tuesday and freed early Wednesday – were seen “around $24.90,” according to a trader.

That was up a dime for the day.

The paper is trading under a temporary ticker symbol, “APLMP.”

Price talk was initially in the 6.5% area but was revised to 6.375%, according to a source.

The deal came upsized from $150 million.

BofA Merrill Lynch, Morgan Stanley, UBS Securities LLC and Wells Fargo Securities LLC led the deal.

Among other recent deals, Chimera Investment Corp.’s 8% series A cumulative redeemable preferreds (NYSE: CIMPrA) were once again busy, and better, up a penny at $24.93.

Meanwhile, Fannie Mae and Freddie Mac were – of course – active again, rising with the rest of the market.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) ticked up 2 cents to $7.88. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) added 14 cents, or 1.9%, to finish at $7.51.

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